* Dana Gas' $920 mln convertible Islamic bond matures Oct 31
* Non-payment on maturity will be first ever for a UAE bond
* Dana reached standstill agreement in Oct - source
(Adds details, quotes, background)
By Dinesh Nair and Amran Abocar
DUBAI, Oct 30 Dana Gas is set to
become the first United Arab Emirates (UAE) company to fail
payment of an Islamic bond on maturity, three sources familiar
with the matter told Reuters on Tuesday.
The UAE's largest listed natural gas firm, hit by payment
delays from Egypt and Iraq's Kurdistan region, will not repay a
$920 million convertible Islamic bond, or sukuk, when it matures
on Wednesday, the sources said.
However, Sharjah-based Dana has won more time to hammer out
a deal with bondholders, they added.
Dana Gas declined to comment.
Although indebted firms in the Gulf Arab state have extended
maturities on billions of dollars in bank loans since the onset
of the financial crisis in 2008-09, no sukuk have been
restructured or unpaid on maturity so far.
Dana has a $1 billion sukuk maturing on Oct. 31. It
repurchased about $80 million of the sukuk in 2008, leaving $920
The five-year sukuk, which was issued with a 7.5 percent
coupon, has gained international interest as a large chunk of
the debt is owned by large investment firms including BlackRock
Inc, Ashmore Group and Spinnaker Capital.
There is "absolutely no chance" of a white knight swooping
in to repay the bond by the due date, a source close to the
talks said. In 2009, the Abu Dhabi government stepped in at the
eleventh hour to help Dubai repay developer Nakheel's $4.1
billion Islamic bond.
The sources said Dana, in which Crescent Petroleum owns a
20-percent stake, reached a so-called standstill a greement with
creditors in early October giving it more time to repay the bond
and that this was effective for up to six months.
However, some creditors are preparing for a potential
"post-default scenario", one source familiar with the
discussions said, in which no deal would be reached at all.
Dana is to issue a statement on Wednesday or early Thursday
detailing its plans on restructuring the bond, two sources said.
The sources spoke on condition of anonymity as the matter is not
Shares in Dana fell 8.5 percent to 0.43 dirhams on the Abu
Dhabi bourse after the Reuters report. The stock closed down
4.26 percent. The shares have been battered by concerns over how
Dana will find funds to repay the bond and limited communication
from the company on the matter. The sukuk has a conversion price
of 1.926 dirhams.
Dana, which is privately-owned, is not seen as a strategic
entity for the UAE and so any government support is unlikely.
In May, Dana said it wanted to find a consensual deal with
sukukholders to repay the bond, and said it had hired Blackstone
Group, Deutsche Bank and law firm Latham &
Watkins as advisers.
Investors have hired Moelis and law firm Linklaters as
The sukuk, which is lightly traded, was
quoted at a bid price of 77 to 78 cents on the dollar on
Tuesday, up from lows of about 68 cents in mid-September,
indicating investors were hopeful of some sort of resolution.
Natural gas producer Dana, which has operations in the UAE,
Egypt and Iraq's Kurdistan region, says its cash flow has been
affected by global economic conditions and regional events,
including Egyptian unrest last year which delayed payments.
The company had a cash balance of 601 million dirhams ($164
million) as of June 30, 2012. Outstanding receivables on Egypt
gas deliveries stood at 729 million dirhams and 1.2 billion
dirhams in the Kurdistan region at that time.
In a recent interview, Dana board member and Crescent Chief
Executive Majid Jafar said Egypt was paying the company for all
fuel it was receiving from its operations and was optimistic
outstanding payments would be settled.
Jafar said last week talks between the company and creditors
were still ongoing, and have been "amicable and friendly."
(Additional reporting by Mirna Sleiman, Rachna Uppal, David
French and Daniel Fineren; Editing by Andrew Torchia and Mark